Through our subsidiary Southeast Power Corporation, we are engaged in the construction and maintenance of electric utility facilities for electric utilities and industrial customers, and the installation of fiber optic cable for fiber optic cable manufacturers, telecommunication companies and electric utilities. Southeast Power, based in Titusville, Florida, performs electrical contracting services in the southeastern, mid-Atlantic and western regions of the United States.

We are also involved through our subsidiary Bayswater Development Corporation and its various subsidiaries in the acquisition, development, management and disposition of land and improved properties. The primary focus of our real estate operations has been the development of residential condominium projects along the east coast of Central Florida. Over the past several years we have developed five condominium projects. Our current project, Pineapple House, is an eight-story building containing thirty-three luxury river-view condominium units located in Melbourne, Florida, and is the first phase of a planned multi-phase development.

Our revenue from electrical construction operations increased 8.6% for the year ended December 31, 2008, as compared to the prior year. The increase in revenue for the year ended December 31, 2008 was primarily due to an increase in demand for our electrical construction services, particularly our fiber optic work, as well as an increase in the number of projects in process in the fourth quarter of 2008. During the first three quarters of 2008, we experienced a slow down in demand for our services and found it necessary to place additional work crews on several existing jobs in an effort to avoid a reduction in our electrical construction work force. Historically, we have found that moving work crews in the middle of a job and adding additional crews to a job does not improve the productivity on that job and this had an adverse effect on our productivity in the second and third quarters of 2008. In early June 2008, we reduced our electrical construction work force by approximately 14%. On June 30, 2008, we announced that we had been awarded new electrical construction contracts aggregating $12.5 million. In July and August 2008, we rehired the majority of those previously laid off employees to meet the anticipated demands of the new contracts we had been awarded. Although work remained slow throughout the summer and into the fall, we experienced a significant improvement in the fourth quarter and are encouraged by the growth in new business and our expansion into Colorado, northern Texas and Missouri. Operating margins of our electrical construction operations increased to 4.7% for the year ended December 31, 2008 from 2.6% for the like period in 2007, primarily the result of increased productivity in the fourth quarter of 2008.

Revenue from our real estate development operations increased 343.6% for the year ended December 31, 2008, when compared to 2007. This increase was mainly due to the reversal of previously recognized revenue on the Pineapple House project upon the notification from buyers of their intent to default on their purchase contracts in 2007, which offset a significant portion of our revenue from sales of condominium units in 2007. Real estate development operations had an operating loss of $3.8 million in the year ended December 31, 2008, compared to an operating loss of $1.2 million in the year ended December 31, 2007, an increase of $2.6 million. This increased loss is primarily the result of the write-down of $37,000 on the Oak Park condominium units (all of which have been sold as of December 31, 2008) and $3.1 million on the remaining Pineapple House condominium units, during the year ended December 31, 2008. As of December 31, 2008, we held fourteen Pineapple House condominium units for sale.

The housing market has continued to deteriorate as consumer confidence declined and the domestic economy experienced the most significant downturn in recent history. General economic pressures continue to drive down the volume and prices of homes and condominiums being sold, as rising levels of foreclosures add inventory to an already saturated market. In addition, the credit markets and mortgage industry have experienced a period of unparalleled instability and disruption. Overall consumer confidence has continued to weaken, resulting in fewer potential home purchasers willing to enter the market. As a result of these and other factors, we recently determined that we will postpone commencement of the next phase of the Pineapple House project until market conditions improve. Looking forward with respect to our real estate development operations, we are unable to predict when these deteriorating market conditions will subside and further deterioration in market conditions may continue to have an adverse impact on the sales and pricing of our condominium units, the commencement and development of new projects and on the results of our real estate development operations. However, we have completed the first phase of the Pineapple House project on budget and in a timely manner, and we believe the project is attractive and of high quality. Furthermore, we are no longer incurring construction costs with respect to this phase and our share of the maintenance costs on the unsold units is expected to be no more than $100,000 annually.

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,

revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to fixed price electrical construction contracts, real estate development projects, deferred income tax assets and environmental remediation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our management has discussed the selection and development of our critical accounting policies, estimates and related disclosure with the Audit Committee of the Board of Directors.

Percentage of Completion - Electrical Construction Segment

We recognize revenue from fixed price contracts on a percentage-of-completion basis, using primarily the cost-to-cost method based on the percentage of total costs incurred to date in proportion to total estimated costs to complete the contract. Total estimated costs, and thus contract income, are impacted by several factors including, but not limited to, changes in productivity and scheduling, and the cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, site conditions and scheduling that differ from those assumed in the original bid (to the extent contract remedies are unavailable), client needs, client delays in providing approvals, the availability and skill level of workers in the geographic location of the project, a change in the availability and proximity of materials and governmental regulation, may also affect the progress and estimated cost of a project's completion and thus the timing of income and revenue recognition.

The accuracy of our revenue and profit recognition in a given period is almost solely dependent on the accuracy of our estimates of the cost to complete each project. Due to our experience and our detailed approach in determining our cost estimates for all of our significant projects, we believe our estimates to be highly reliable. However, our projects can be complex and in almost every case the profit margin estimates for a project will either increase or decrease to some extent from the amount that was originally estimated at the time of bid. Because we have a number of projects of varying levels of complexity and size in process at any given time these changes in estimates can offset each other without materially impacting our overall profitability. If a current estimate of total costs indicates a loss on a contract, the projected loss is recognized in full when determined. Accrued contract losses as of December 31, 2008 and 2007 were $28,000, and $0, respectively. Revenue from change orders, extra work, variations in the scope of work and claims is recognized when realization is probable.

Percentage of Completion - Real Estate Development Segment

For 2007, all revenue associated with real estate development projects that met the criteria specified by SFAS No. 66, "Accounting for Sales of Real Estate," was recognized using the percentage-of-completion method. Under this method, revenue is recognized when (1) construction is beyond a preliminary stage, (2) a substantial percentage (at least one-third) of the condominiums are under firm, non-refundable contracts, except in the case of non-delivery of the unit or interest, (3) sufficient units have already been sold to assure that the entire property will not revert to rental property, after considering the requirements of applicable state laws, the condominium contract, and the terms of applicable financing agreements, (4) collection of the sales price is reasonably assured,
(5) deposits equal or exceed 10% of the contract price, and (6) sales proceeds and costs can be reasonably estimated. We determine that construction is beyond a preliminary stage when engineering and design work, execution of construction contracts, site clearance and preparation, excavation and the building foundation are complete.

In November 2006, the FASB ratified EITF Issue No. 06-8, "Applicability of a Buyer's Continuing Investment under FASB Statement No. 66 for Sales of Condominiums." EITF No. 06-8 requires condominium sales to meet the continuing involvement criterion of SFAS No. 66 in order for profit to be recognized under the percentage of completion method. EITF No. 06-8 became effective for our fiscal year beginning January 1, 2008. This consensus could require that additional deposits be collected by developers of condominium projects that wish to recognize profit during the construction period under the percentage-of-completion method. The effect of this EITF No. 06-8 was not material to our consolidated financial statements, as there are no projects currently under construction. If we are unable to meet the requirements of EITF No. 06-8 on future projects, we will be required to delay revenue recognition until the aggregate investment tests described in SFAS No. 66 and EITF No. 06-8 have been met. See note 1 to the consolidated financial statements.

We believe that a material difference in total actual project costs versus total estimated project costs is unlikely due to the nature of the fixed price contracts we enter into with the general contractors on our real estate projects.

If a current estimate of total project costs indicates a loss on a project, the projected loss is recognized in full when determined. There were no accrued contract losses as of December 31, 2008 or 2007 in the real estate development segment. The timing of revenue and expense recognition is contingent on construction productivity. Factors possibly impeding construction productivity include, but are not limited to, supply of labor, materials and equipment, scheduling, weather, permitting and unforeseen events. When a buyer defaults on the contract for sale, revenue and expenses recognized in prior periods are adjusted in the period of default. In the year ended December 31, 2007, as a result of thirteen buyers defaulting on their purchase contracts, we recorded a reversal in revenue previously recognized of $7.2 million and in costs of sales previously recorded of $4.7 million.

Real Estate Inventory Valuation

Real estate inventory, which consists of completed condominium units, is carried at the lower of cost or fair value, less cost to sell. In accordance with SFAS No. 144, real estate inventory is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount or basis is not expected to be recovered, impairment losses are recorded and the related assets are adjusted to their estimated fair value.

In estimating the cash flows for completed condominium units, we use various estimates such as (a) expected sales pace to absorb the number of units based upon economic conditions that may have either a short-term or long-term impact on the market in which the units are located, competition within our market, historical sales rates of the units within the project; and (b) expected net sales prices in the near-term based upon current pricing estimates, as well as estimated changes in future sales prices based upon historical sales prices of the units within the project or historical sales prices of similar product offerings in our market. Our determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risks associated with selling the assets and related estimated cash flows. In determining the fair value of the remaining units in our Pineapple House project we used a discount rate of 18%.

We estimate fair values of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or our assumptions change. For example, further market deterioration or changes in our assumptions may lead to us incurring additional impairment charges on previously impaired inventory.

Deferred Tax Assets

We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance for deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the deferred tax assets are expected to be recovered or settled. If we determine that we would not be able to realize all or part of our deferred tax assets, a valuation allowance would be recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized. In the event we were to subsequently determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the previously recorded valuation allowance would increase income in the period such determination was made.

As of December 31, 2008, our deferred tax assets were largely comprised of NOL carryforwards, an alternative minimum tax ("AMT") credit carryforward and inventory adjustments on unsold condominium units (refer to note 5 to the consolidated financial statements). SFAS No. 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the SFAS No. 109 more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with loss carryforwards not expiring unused and tax planning alternatives.

Based upon an evaluation of all available evidence, we established a valuation allowance against our deferred tax assets totaling $1.9 million during the fourth quarter of 2008. Our cumulative loss position over the evaluation period and the current uncertain and volatile market conditions were significant negative evidence in assessing the need for a valuation allowance. In future periods, the allowance could be reduced based on sufficient evidence indicating that it is more likely than not that a portion of our deferred tax assets will be realized. The net deferred tax asset valuation allowance was $1.9 million as of December 31, 2008 compared to $0 as of December 31, 2007. The minimum amount of future taxable income required to be generated to fully realize the deferred tax assets is approximately $7.0 million.

Provision for Remediation

In September 2003, we were notified by the EPA that we are a PRP with respect to possible investigation and removal activities at a mine that we formerly owned. Refer to note 6 to the consolidated financial statements for a discussion of this matter.

It is impossible at this stage to estimate the total costs of the remediation at the Site or our share of liability for those costs due to various factors, including incomplete information regarding the Site and the other PRPs, uncertainty regarding the extent of actual remediation costs and our equitable share of liability for the contamination.

As of December 31, 2008, the cumulative net expense was $174,000 (within discontinued operations), which represents the current estimate of our share of the costs associated with both an emergency removal action previously undertaken by the EPA and actual remediation costs, the professional fees associated with the EE/CA study and the anticipated professional fees estimated through the completed remediation, all reduced by both actual and estimated insurance recoveries. Total actual costs to be incurred at the Site in future periods may vary from this estimate, given inherent uncertainties in evaluating environmental costs. As of December 31, 2008, we have recorded a reserve balance for future applicable costs of $153,000 (accrued as a current liability within discontinued operations). The accrual will be reviewed periodically based upon facts and circumstances available at the time, which could result in changes to its amount.

YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007

The table below is a reconciliation of our operating income (loss) attributable
to each of our segments for the two year period ended December 31 as indicated:



                                                   2008             2007
         Electrical construction
         Revenue                               $ 29,062,099     $ 26,761,440
         Operating expenses
         Cost of goods sold                      24,337,479       22,881,363
         Selling, general and administrative        333,737          265,168
         Depreciation                             2,993,471        2,905,062
         Provision for doubtful accounts             27,078               -
         Loss on sale of assets                       7,175           21,774

         Total operating expenses                27,698,940       26,073,367

         Operating income                      $  1,363,159     $    688,073


         Real estate development
         Revenue                               $  2,382,888     $    537,135
         Operating expenses
         Cost of goods sold                       2,492,060          794,612
         Selling, general and administrative        478,816          439,283
         Depreciation                                23,352           24,842
         Write down of inventory                  3,173,506          473,227

         Total operating expenses                 6,167,734        1,731,964

         Operating loss                        $ (3,784,846 )   $ (1,194,829 )

Operating income (loss) is total operating revenue less operating expenses inclusive of depreciation and selling, general and administrative expenses for each segment. Operating expenses also include any gains or losses on the sale of property and equipment. Operating income (loss) excludes interest expense, interest and other income, and income taxes.

Revenue

Total revenue in the year ended December 31, 2008 increased by 15.2% to $31.4 million, compared to $27.3 million in the year ended December 31, 2007. This increase in total revenue was mainly due to increased revenue recognized in both the electrical construction segment and the real estate development segment for the year ended December 31, 2008.

Electrical construction revenue increased 8.6% to $29.1 million for the year ended December 31, 2008, compared to $26.8 million for the year ended December 31, 2007. The increase in revenue for the year ended December 31, 2008, when compared to the same period in 2007, is largely due to an increase in demand for our electrical construction services,

particularly our fiber optic work, as well as an increase in the number of projects in process in the fourth quarter of 2008. During the first three quarters of 2008, we had experienced a continued slowdown in demand for our electrical construction services and a reduction in the size of projects in process, resulting from fewer available large projects as core utility customers reduced spending in the early part of 2008, which have been offset by the improved performance in the fourth quarter. The varying magnitude and duration of electrical construction projects may result in substantial fluctuation in our backlog from time to time. At December 31, 2008, the approximate value of uncompleted contracts was $14.6 million, compared to $5.9 million at December 31, 2007. We expect to complete 70% of this backlog during the year ending December 31, 2009. We cannot project the levels of future demand for construction services.

Real estate construction reported net revenue of $2.4 million for the year ended December 31, 2008, as compared to $537,000 for the year ended December 31, 2007. In 2008 we recognized revenue on the sale of four units in the Pineapple House project and three units in the Oak Park project. In 2007, revenue consisted of $4.0 million in revenue recognized on the Pineapple House units with purchase contracts received prior to completion of the project, which closed as agreed upon after completion of the project, $2.6 million in revenue received in the fourth quarter of 2007 upon the sale of six additional Pineapple House units, $722,000 collected from forfeited deposits, $300,000 in revenue from the sale of one Oak Park unit and $76,000 in condominium association dues received by Pineapple House Condominium Association, Inc. ("PHCA"), partially offset by the reversal of $7.2 million of previously recognized revenue on the Pineapple House project upon the notification from thirteen buyers of their intent to default on their contracts. During the year ended December 31, 2008, we had no projects under construction.

As of December 31, 2008, there was no backlog for the real estate development operation's segment.

Operating Results

Electrical construction operations had an operating income of $1.4 million in the year ended December 31, 2008, compared to an operating income of $688,000 during the year ended December 31, 2007. Operating margins on electrical construction operations increased to 4.7% for the year ended December 31, 2008, from 2.6% for the year ended December 31, 2007. The increase in operating margins for the year ended December 31, 2008, when compared to the same period in 2007, was largely the result of improved productivity on several jobs, particularly in the fourth quarter of 2008.

Real estate development operations had an operating loss of $3.8 million in the year ended December 31, 2008, compared to an operating loss of $1.2 million in the year ended December 31, 2007, an increase of $2.6 million. This loss includes $3.2 million in valuation adjustments, consisting of the write down of $37,000 on the Oak Park inventory to in the second quarter of 2008 and the write down of $3.1 million on the Pineapple House inventory in the fourth quarter of 2008, partially offset by the improved margin on the sale of real estate inventory in the current year. The operating loss in the year ended December 31, 2007 includes $473,000 in valuation adjustments.

Costs and Expenses

Total costs and expenses, and the components thereof, increased to $36.5 million in the year ended December 31, 2008, from $30.5 million in the year ended December 31, 2007, an increase of 19.6%.

Electrical construction cost of goods sold increased to $24.3 million in the year ended December 31, 2008, from $22.9 million in the year ended December 31, 2007, an increase of 6.4%. The increase in costs reflects the increased level of construction activities.

Costs of goods sold for real estate development operations increased to $2.5 million for the year ended December 31, 2008, from $795,000 for the year ended December 31, 2007. The cost of goods sold for 2008 reflects the costs associated with the sale of units in both the Pineapple House project and the Oak Park project. The cost of goods sold for 2007 consists of $5.3 million in costs recognized on the Pineapple House and Oak Park units, which closed in the prior year and $207,000 in general costs for real estate development, offset by the reversal of $4.7 million in previously recognized costs associated with the reversal of revenue due to the defaults on the Pineapple House development, discussed above.

The following table sets forth selling, general and administrative ("SG&A") expenses for each segment for the years ended December 31 as indicated:

                                              2008          2007
                 Electrical construction   $   360,815   $   265,168
                 Real estate development       478,816       439,283
                 Corporate                   2,487,134     2,574,069

                 Total                     $ 3,326,765   $ 3,278,520

SG&A expenses remained essentially unchanged at $3.3 million for both the year ended December 31, 2008 and the year ended December 31, 2007. As a percentage of revenue, SG&A expenses decreased to 10.6% for 2008 from 12.0% in 2007, due primarily to the increase in revenue in the current year.

The following table sets forth depreciation expense for each segment for the years ended December 31 as indicated:

. . .